Philip J. Shrives

The use of disclosure indices in accounting research: A review article

Abstract This article is concerned with the measurement of disclosure in published financial reports. In particular, the use of a disclosure index is examined by reviewing the literature that has made use of this measurement technique. Disclosure indices are extensive lists of selected items which may be disclosed in company reports. Calculating an index score for a particular company can give a measure of the extent of disclosure but not necessarily the quality of the disclosure. Items included in the disclosure index may be weighted in order to take account of the fact that some items are viewed as more important than others. The aim of this article is to bring together and summarise a selection of projects that have employed disclosure indices and to comment on the work carried out to date.

Voluntary social reporting in three FTSE sectors: a comment on perception and legitimacy

In examining the effects of the Exxon Valdez oil spillage on corporate social reporting (CSR) in the annual reports of oil companies, Patten suggested examining companies in other industries and their response to social (e.g. environmental) threats. This paper examines environmental and social reporting in five companies representing three FTSE sectors, selected according to an intuitive understanding of society’s perceptions of their depth of “sin” or supposed unethical behaviour. Social disclosure data were captured from annual corporate reports between 1975 and 1997. Results suggest that legitimacy theory may be an explanation of disclosure in some cases but not in others. The distorting effects of perception (of legitimacy‐threatening factors) and the increase in choices of disclosure media partly explain the mixed results and these factors and it is suggested, challenge the usefulness of future “annual‐report only” studies.

Cross‐sectional effects in community disclosure

Purpose – This paper seeks to address a gap in the literature in that it explores community disclosures in annual reports examining annual reports for 5 UK FTSE 100 sectors between, 1974 and 2000. Design/methodology/approach – The sample was bifurcated into types – those with higher public profile and those with lower public profile based on a measure of “proximity to end user”. Two approaches were adopted in the paper: longitudinal volumetric word count mean and frequency of disclosure by company. Findings – The two approaches demonstrated that community disclosure was positively associated with public profile. The findings are consistent with reporting behaviour found in other categories of voluntary disclosure, where disclosure has been found to be associated with the presumed information demands of specific stakeholders. Additionally the research supported a legitimacy theory-based explanation of cross-sectional variability in community disclosures. Illustrative disclosures from a number of companies are also presented in the paper. Research limitations/implications – Further areas of research are suggested by these findings. In addition to articulating the potential value of examining community disclosure patterns in other contexts (e.g. in other sectors and other national situations), and in other media (e.g. internet studies), the findings in this study suggest that there may be value in exploring the ways in which voluntary disclosure responds to other external structural variables. Originality/value – The contribution of this paper has been to show that a hitherto less-analysed category of voluntary social disclosure (community disclosure) is cross-sectionally responsive to the structural vulnerability of companies to issues associated with “general” social concern.

Transparency and the disclosure of risk information in the banking sector

The essence of any bank is that it is a risktaking enterprise and therefore, as a part of good corporate governance, it is expected that relevant risk-related information will be released to the marketplace. Currently, however, it is suggested that there is insufficient disclosure of risk information by banks and as a consequence Pillar 3 of Basel II lays out a comprehensive framework for risk disclosures with the intention that this will enable stakeholders to assess the risk pro.le of a bank. In addition, one outcome of the UK company law review is that there will be a requirement for all quoted companies to discuss risks and uncertainties within the annual report. This paper analyses these risk disclosure requirements while also reviewing current bank disclosure practices within the context of this risk disclosure debate. The important issues of disclosure of forward-looking risk information, location of disclosure and proprietary risk information are also discussed together with their implications for the proposed disclosure requirements.

Examining risk reporting in UK public companies

Purpose – This paper examines risk information disclosed by UK public companies within their annual reports. The types of risk information disclosed are analyzed and the authors examine whether a relationship exists between company size or level of risk and risk disclosure totals. Design/methodology/approach – No prior empirical studies of the risk information content of annual reports have been undertaken. To analyze the risk disclosures, a sentence-based approach was used. Findings – Overall the results indicate that the companies sampled are not providing a complete picture of the risks they face. There is minimal disclosure of quantified risk information and a significant proportion of risk disclosures consist of generalized statements of risk policy. More usefully directors are releasing forward-looking risk information. The principal driver affecting levels of risk disclosure is company size and not company risk level. Research limitations/implications – Further risk disclosure research is possible in many different areas. Cross-country studies could be undertaken as could risk disclosure studies within specific industry sectors. A limitation of the sentence-based methodology is that it does not measure the quality of the risk disclosures and therefore different methods may be adopted in future studies. Practical implications – Professional bodies attempting to improve risk reporting have not convinced directors of the benefits associated with greater voluntary risk disclosure. In the UK this has led to a mandatory requirement to provide better risk information being forced upon companies through legislation enacted by the UK government. Originality/value – The area this paper researches is of particular importance given recent accounting scandals that have occurred. No previous risk disclosure studies have been published, therefore this exploration is also valuable in linking risk management and transparency.

Social disclosure and legitimacy in Premier League football clubs: the first ten years

Purpose – This longitudinal study aims to examine the extent to which football clubs in the Premier League communicate community activities in their annual reports through social disclosure. The research also seeks to examine the relevance and use of the annual report as a disclosure medium by football clubs. The need for social disclosure is examined in conjunction with media coverage of issues affecting Premier League clubs.Design/methodology/approach – This study is deductive using three main hypotheses to test relevant underpinning theory used within the research. The study uses content analysis of annual report social disclosures of ten Premier League football clubs from 1993 to 2002, covering the first ten years of the Premier League. A questionnaire was used to evaluate the use of annual reports by those clubs. In addition, media reporting data from The Sunday Times is examined.Findings – This study finds that there has been an increase in adverse media reporting concerning football, football clubs...

Voluntary disclosure narratives: more research or time to reflect?

Purpose - This editorial aims to provide an overview of the four papers included in this special issue. It discusses the development of voluntary disclosure research and its potential future directions. Design/methodology/approach - The editorial adopts a review approach, identifying key issues and provides a context for future research. Findings - The editorial highlights some of the difficulties with research into voluntary disclosure, calls for further reflection and suggests factors to consider in future research in this area. Originality/value - The editorial provides a review of current issues in disclosure research and reviews these papers which demonstrate a particular approach to research that is relevant to both practitioners and academics.

Examining the link between religion and corporate governance: insights from Nigeria

This article examines whether the degree of religiosity in an institutional environment can stimulate the emergence of a robust corporate governance system. This study utilizes the Nigerian business environment as its context and embraces a qualitative interpretivist research approach. This approach permitted the engagement of a qualitative content analysis (QCA) methodology to generate insights from interviewees. Findings from the study indicate that despite the high religiosity among Nigerians, religion has not stimulated the desired corporate governance system in Nigeria. The primary explanation for this outcome is the presence of rational ordering over religious preferences thus highlighting the fact that religion, as presently understood and practiced by stakeholders, is inconsistent with the principles underpinning good corporate governance.